Elasticity

Elasticity is a measure of responsiveness. For example, an economist may like to know how the quantity demanded for oil will be impacted by a 10 percent price increase. In other words, the economist is looking at how responsive the quantity demanded is to a change in price. Measuring and understanding elasticity is a very important skill that economists use when advising policy makers on the impact of establishing a new tax, or removing a current one, on the market. Also, firms can gain valuable insight on how increasing or decreasing their price will affect total revenue. The three basic categories we will focus on are price elasticity, income elasticity, and cross price elasticity. We will also take a look at elasticity in practice with its relationship to taxes.

• Price Elasticity
  • Price Elasticity and the Individual vs. "in general"
• Income Elasticity
• Cross-Price Elasticity

Reference:

• Calculating Percentage Change

  Elasticity in Practice: a guide to the relationship between elasticity and taxes.

•  Elasticity and Taxes
  • Tax Incidence
    •  Tax Incidence Applied to the United States
  • Elasticity and Tax Incidence
  • Elasticity and Dead Weight Loss
  • Apportioning the Tax Burden
    • Benefit Received vs. Ability to Pay
    • Horizontal and Vertical Equity
    • Vertical Equity in the United States